Bank Negara Malaysia (BNM) has issued digital banking licenses to five players, including consortiums led by Grab-Singtel (GXS Bank Pte Ltd and Kuok Brothers Sbn Bhd) and Sea (Sea Limited and YTL Digital Capital Sdn Bhd).
In a statement, CEO designate of the Grab-Singtel venture Pei Si Lai said, “The opportunity to build the Malaysian digital bank from the ground up and be at the forefront of the fast-evolving Malaysian FinTech landscape is incredibly exciting.”
She said that the digital bank would work closely with BNM, the Ministry of Finance and key business partners to serve the underbanked and underserved segments of society in Malaysia, including gig workers and small businesses.
Both Grab-Singtel and Sea each won a full digital banking license in Singapore in 2021.
“Malaysia has many of the characteristics digital banking players are looking for, with a sizeable population, large smartphone penetration and young population eager to try out new services,” said Shankar Kanabiran, financial services consulting partner at EY.
BNM has announced its plans to issue five digital banking licenses as early as July 2021. The assessment criteria include the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps.
“Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12 to 24 months,” BNM’s statement added.
The other three consortiums scoring digital banking licenses are: Boost Holdings Sdn Bhd and RHB Bank Berhad; AEON Financial Service Co., Ltd, AEON Credit Service (M) Berhad and MoneyLion Inc; and a consortium led by KAF Investment Bank Sdn Bhd. The latter two are under the country’s Islamic Financial Services Act (IFSA) of 2013.
“Digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy by overcoming geographical barriers, reducing transaction costs and promoting better financial management,” said Bank Negara Malaysia governor Tan Sri Nor Shamsiah.
Meanwhile, Moody’s Investors Service earlier expressed caution around Southeast Asia’s digital banks. According to the rating agency, most digital banks in Southeast Asia operate under a business model that has yet to be tested across credit cycles, and the profitability of underwriting the unbanked and underserved sector is unknown.